Kraft 2005 Annual Report Download - page 83

MERRILL CORPORATION FLANGST// 9-MAR-06 02:25 DISK126:[06CHI5.06CHI1135]EA1135A.;8
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KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: EA1135A.;8
Merrill Corporation/Chicago [phone] Page Dim: 8.250 X 10.750Copy Dim: 38. X 54.3
The estimated future benefit payments from the Company’s pension plans at December 31, 2005,
were as follows:
U.S. Plans Non-U.S. Plans
(in millions)
2006 .................................................. $ 347 $ 180
2007 .................................................. 406 182
2008 .................................................. 361 185
2009 .................................................. 404 190
2010 .................................................. 444 196
2011-2015 .............................................. 2,751 1,042
Postretirement Benefit Plans
Net postretirement health care costs consisted of the following for the years ended December 31,
2005, 2004 and 2003:
2005 2004 2003
(in millions)
Service cost ................................................ $ 48 $ 43 $ 41
Interest cost ................................................ 170 173 173
Amortization:
Unrecognized net loss from experience differences .................. 61 46 40
Unrecognized prior service cost ................................ (26) (25) (25)
Net postretirement health care costs ............................. $253 $237 $229
In December 2003, the United States enacted into law the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the ‘‘Act’’). The Act establishes a prescription drug benefit
under Medicare, known as ‘‘Medicare Part D,’’ and a federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D.
In May 2004, the FASB issued FASB Staff Position No. 106-2, ‘‘Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003’’
(‘‘FSP 106-2’’). FSP 106-2 requires companies to account for the effect of the subsidy on benefits
attributable to past service as an actuarial experience gain and as a reduction of the service cost
component of net postretirement health care costs for amounts attributable to current service, if the
benefit provided is at least actuarially equivalent to Medicare Part D.
The Company adopted FSP 106-2 in the third quarter of 2004. The impact for 2005 and 2004 was a
reduction of pre-tax net postretirement health care costs and an increase in net earnings. The amounts in
the table above reflect the following benefits:
2005 2004
(in millions)
Service cost ...................................................... $ 7 $ 3
Interest cost ...................................................... 23 10
Amortization of unrecognized net loss from experience differences ............... 25 11
Reduction of pre-tax net postretirement healthcare costs and an increase in net
earnings ....................................................... $55 $24
In addition, as of July 1, 2004, the Company reduced its accumulated postretirement benefit
obligation for the subsidy related to benefits attributed to past service by $315 million and decreased its
unrecognized actuarial losses by the same amount.
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